PM Daily Market Commentary - 4/14/2015

By davefairtex on Wed, Apr 15, 2015 - 3:44am

Gold dropped -6.70 to 1191.90 on heavy volume, while silver fell -0.13 to 16.12 on moderately heavy volume.  PM sold off during Asia and London trading, with gold touching 1183.50 immediately prior to the Retail Sales report at 0830.  Once the report hit, PM rallied back, but not strongly enough to move PM back into the green on the day.

The rally in PM was driven by a huge drop in the buck, but since gold ended up down -0.56% and the buck fell -0.83%, this indicates gold had a bad day in other currencies as well.  Not even a falling dollar could rescue gold from its weakness.

The miners were a bit happier with the falling buck, with GDX up +0.78% on light volume, while GDXJ up +0.25% on very light volume.  GDX remains above its 9 EMA, which is helpful, and the GDX:$GOLD ratio continues to rise.  However the very light volume suggests traders are waiting for some event to occur before they make a directional decision about seriously buying or selling.  I'm not seeing any clear signal on GDX right now.

The dollar fell -0.83 to 98.94, with most of the loss occurring in the hour following the 0830 Retail Sales report.  I thought the report looked all right, and equities actually rallied, but the buck fell hard, dropping almost a full point in less than an hour.  Right now the dollar is strongly driven by US economic data.  Today, the buck marked a swing high, which suggests that the dollar may continue to fall.  I suspect that outcome will be contingent on other US economic data due out this week.

SPX sold off slightly prior to market open, but then rallied back, closing up +3.41 to 2095.84, failing to confirm the swing high from yesterday.  The equity market has yet to determine which direction it will go.  Perhaps the Industrial Production release due out tomorrow at 0915 will prove decisive.  VIX fell -0.27 to 13.67.

Bond ETF TLT jumped higher, rising +0.71% on the day.  The rally in bonds may be hinting at equity market weakness to come.

The CRB (commodity index) rallied +1.02%; generally speaking, commodities appreciate a falling dollar.  CRB is looking like it might re-test the 50 MA in the near future.  If it can close above the 50 that would be positive for commodities.

WTIC rallied strongly today, climbing +1.45 [+2.79%] to 53.44, and is fast approaching a breakout point.  A close above 55 would be a bullish sign for oil, confirming the double bottom.  While EIA data is projecting a US production peak in April, more real-time data from North Dakota suggests that at least in the Bakken region, production peaked back in December, and has been falling ever since.  Well completions in the Bakken have almost stopped.  While there were on average about 125 rigs working in February in the Bakken, only 43 wells were actually completed.  The backlog of wells awaiting completion is now up to 900.  As long as price stays low, presumably those wells will remain uncompleted.

Oil is looking strong and set to attempt a breakout relatively soon.  Unfortunately, PM continues to look weak even with a falling dollar, which is not a positive sign.  It appears that gold still has more correction to work through before the buyers show up.

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